Copyright© Ralf Rühmeier
Climate change and development Climate finance: Germany remains a reliable partner
By providing public funding through its development policy, Germany is making a major contribution to the global implementation of the Paris Agreement (External link). Just like all other nations, developing countries and emerging economies will also need to embark on ambitious programmes to reduce greenhouse gas emissions and adapt to the consequences of climate change if the world is to achieve climate neutrality and climate resilience in the 21st century. That means shifting to a low-carbon lifestyle and economy and making societies more resilient to the consequences of climate change.
Yet public funds will not be enough to achieve such a fundamental transformation. What it will take is for all global financial flows, including private investment and foreign direct investment and across all economic sectors and all financial markets, to be aligned with those two goals. That was what all the parties to the Paris Agreement, including Germany, agreed in 2015 (cf. Article 2.1.c).
Indeed, back in 2009 in Copenhagen, the industrialised countries had already committed to mobilise as of 2020 an additional annual 100 billion US dollars from public and private sources for climate change mitigation and adaptation in developing countries.
The 2015 Paris Climate Conference agreed to continue providing 100 billion US dollars annually from 2020 until, initially, 2025. After that, a new international climate financing goal is to be set. It should be in excess of 100 billion US dollars and reflect in particular the needs and priorities of developing countries. Negotiations on the new goal are expected to conclude in 2024.
Furthermore, the 2021 Glasgow Climate Conference urged industrialised nations to at least double their collective provision of adaptation finance for developing countries from 2019 levels by 2025, in order to achieve a balance between adaptation and mitigation funds.
Germany's contribution to international climate finance
Germany has already considerably increased its climate finance contributions. Between 2005 and 2022, the German government boosted budgetary funds for climate action more than tenfold. Since 2017, the grant equivalents from KfW development loans have also been included in calculations. With those sums included, the total amount committed by the German government for climate change mitigation and adaptation measures stood at some 6.3 billion euros in 2022. Over 85 per cent of that came from the budget of the Federal Ministry for Economic Cooperation and Development (BMZ). Budgetary funds for climate finance have increased by roughly one billion euros from 2021. It is a declared goal of the German government that the provision of financial resources should aim to achieve a balance between adaptation and mitigation activities. This goal was largely attained in 2022. In that year, mitigation accounted for 56 per cent and adaptation for 44 per cent.
This increase goes beyond what then Federal Chancellor Angela Merkel announced in 2015, when she said that Germany would strive to double its climate financing from an annual two billion euros in 2014 to four billion euros in 2020. That goal was already attained in 2019. At the 27th Climate Conference in November 2022, Federal Chancellor Olaf Scholz affirmed the goal of increasing Germany’s contribution to at least six billion euros per year by 2025 at the latest and thus honouring the commitment made by Angela Merkel at the G7 summit in June 2021. The Chancellor’s pledge was fulfilled for the first time in 2022, three years earlier than committed.
In addition to the funding provided from its federal budget, Germany also contributes through public loans (administered by KfW and DEG) and by mobilising private funding.
Significantly, Germany has also used public funding to leverage private climate finance, mainly in the shape of revolving credit lines for local (development) banks, investments in structured funds and public-private partnerships (PPPs). Thus in 2022, Germany's contributions from all sources totalled 9.96 billion euros.
Bilateral and regional activities
Climate finance goes into measures both to mitigate greenhouse gas emissions and to help countries adapt to climate change. Some climate-related projects also contribute to conserving forests and biodiversity, for example REDD+ projects. The BMZ is now also assisting selected partner countries in their efforts to harness international market mechanisms under Article 6 of the Paris Agreement in such a way that these make financial contributions to greenhouse gas emissions reduction while also facilitating sustainable development.
Germany channels most of its climate finance through bilateral cooperation. The BMZ works together with nearly all its partner countries on the issue of climate change. Activities build on the partner countries’ own efforts to integrate climate change mitigation and adaptation into their national development strategies.
On average, more than 85 per cent of Germany's annual funding for climate finance comes from the BMZ's budget. In addition, the Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection (BMUV) supports a broad programme of climate measures through its International Climate Initiative (External link) (IKI). The Federal Ministry for Economic Affairs and Climate Action (BMWK), the Federal Ministry of Education and Research (BMBF) and the Federal Foreign Office (AA) also contribute to Germany's climate finance.
When it comes to effecting change on a large scale, multilateral organisations like the World Bank Group and the United Nations are important partners. They are able to implement major programmes in developing countries and emerging economies and can coordinate the inputs of various different donors. Multilateral institutions also often play a key role in policy dialogue at national and international level. To complement its bilateral activities in the climate sector, the BMZ therefore has an ambitious multilateral portfolio.
Germany makes a major contribution to multilateral climate finance. For example, the BMZ is currently the largest donor to the Global Environment Facility (External link) (GEF) and the Least Developed Countries Fund (External link), the GEF’s fund for the poorest nations. Germany is also one of the largest donors to a further specialised GEF fund, the Special Climate Change Fund (External link), as well as to the Green Climate Fund (External link) (GCF), the Adaptation Fund (External link) and the Climate Investment Funds (External link) (CIF). It is, moreover, an active and committed partner in international institutions, where it puts forward the development policy positions and values embraced by Germany.
The BMZ is working with the multilateral and regional development banks to help establish conducive settings for climate policies to be truly effective. Multilateral banks can act as global pioneers, in particular by channelling global financial flows into low-emission and climate-resilient investment pathways. That means ensuring that their whole range of activities take account of climate change and its consequences. Among other things, the BMZ has successfully pressed for the International Development Association (External link) (IDA), the World Bank’s financing instrument for the poorest countries, to mainstream climate change mitigation and adaptation in its core business.
BMZ’s contributions to climate action in figures
In the interests of maximum transparency, the information presented below on the BMZ’s climate finance contributions over recent years is broken down wherever possible by project and presented in the form of tables and graphs. The figures are broken down by region (e.g. Africa) and instruments (e.g. non-governmental agencies). As of 2019, they are also broken down by budget line (e.g. budget line 2301 866 11 – bilateral Financial Cooperation – loans/grants). The figures also show how much funding was made available for mitigation and how much for adaptation.
Further information on the climate projects implemented by KfW and GIZ can be found in the implementing organisations’ own databases (GIZ project database (External link), KfW project database (External link)).
Germany reports its climate finance figures to the EU (in accordance with Article 16 of the Greenhouse Gas Monitoring Mechanism Regulation) and also submits the relevant tables (External link). The tables for 2013 to 2019 can be found on this page. As of 2021, reporting obligations to the EU changed in accordance with Article 6 of the implementing regulation (External link) relating to the Regulation on the Governance of the Energy Union and Climate Action (External link).
In additional to its annual reporting obligations to the EU, the German government also, as a party to the UN Framework Convention on Climate Change, submits its climate finance figures to the UNFCCC in the form of a Biennial Report. Germany’s fifth Biennial Report (External link) outlining the financial support provided for climate action in 2019 and 2020 was submitted in 2022 and published in early 2023.
As at: 23/10/2023